SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 12, 1999
_____________________
Exact Name of Registrant as
Specified in Its Charter: SMTEK INTERNATIONAL, INC.
___________________________________
DELAWARE 1-8101 33-0213512
_____________________________ ____________ _____________
State or Other Jurisdiction of Commission I.R.S. Employer
Incorporation or Organization File Number Identification No.
Address of Principal Executive Offices: 2151 Anchor Court
Thousand Oaks, CA 91320
_________________________
Registrant's Telephone Number, Including
Area Code: (805) 376-2595
_________________________
Former Name or Former Address,
if Changed Since Last Report: Not applicable
_________________________
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On November 12, 1999, SMTEK International, Inc. ("SMTEK" or the
"Company") sold 100% of the capital stock of its printed circuit board
operation, Irlandus Circuits Ltd. ("Irlandus"), which is located in Northern
Ireland. Irlandus was the sole operating unit which comprised SMTEK's
printed circuit board business segment. Accordingly, the sale of Irlandus
has been accounted for as the sale of a discontinued operation. The
purchaser was a management buy-out team which included one manager from
Irlandus and one manager from the Company's electronics manufacturing
services operation in Northern Ireland. The purchase price was negotiated
on an arms length basis between the Company and the purchaser. The sales
proceeds in the aggregate amount of 2,800,000 British pounds sterling
(approximately $4.5 million) consisted of a cash dividend of 500,000 pounds
sterling paid by Irlandus just prior to closing and cash of 2,300,000 pounds
sterling paid by the purchaser at closing.
In connection with the sale, SMTEK and the purchaser entered into a
purchase/supply agreement pursuant to which SMTEK agreed to purchase printed
circuit boards from Irlandus of at least 350,000 pounds sterling annually
(approximately $560,000) for the next three years. In addition, SMTEK and the
purchaser entered into a computer services agreement whereby SMTEK will provide
computer support services to Irlandus for a minimum term of one year for a flat
monthly fee of 1,500 pounds sterling (approximately $2,400) plus on-site
maintenance billed at 20 pounds sterling to 35 pounds sterling per hour.
In its press release dated November 19, 1999 which announced the sale
of Irlandus (attached as Exhibit 99.1 hereto), and in its Form 10-Q filed
with the Securities and Exchange Commission on November 22, 1999, the
Company stated that the gain on the sale was not material. The transaction
resulted in an increase in comprehensive income of approximately $94,000.
The components of such increase, as explained in more detail below, are a
loss from sale of discontinued operations of approximately $662,000 and
other comprehensive income of approximately $756,000.
At the time of sale, Irlandus had an accumulated foreign currency
translation loss of approximately $756,000. In accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation", this
amount has been included in the determination of the $662,000 loss on sale
of discontinued operations as shown in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999. In accordance with Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", an equal and
offsetting amount to the $756,000 foreign currency translation account
balance included in the loss on sale of discontinued operations is reported
as other comprehensive income in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999. Taking this offsetting amount into consideration,
the sale of Irlandus results in an increase in comprehensive income of
approximately $94,000.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Pro forma financial information:
The unaudited pro forma condensed consolidated balance sheet of the
Company as of September 30, 1999, the unaudited pro forma condensed
consolidated statement of operations and other comprehensive income
(loss) for the year ended June 30, 1999, and the unaudited pro forma
condensed consolidated statement of operations for the three months
ended September 30, 1999 are attached hereto as pages F-1 through F-5.
(b) Exhibits
Exhibit Description
_______ ____________
10.1 Agreement dated November 12, 1999 between DDL Europe
Limited (a subsidiary of the Company) and Fast Track
Circuits Limited for the sale of the capital stock of
Irlandus Circuits Limited
99.1 Press release dated November 19, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMTEK INTERNATIONAL, INC.
December 28, 1999 /s/ Richard K. Vitelle
_________________________________ _________________________________
Date Richard K. Vitelle
Vice President -Finance
(Principal Financial Officer)
<PAGE>
DESCRIPTION OF UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
REFLECTING THE SALE OF IRLANDUS CIRCUITS LTD.
BY SMTEK INTERNATIONAL, INC.
The following unaudited pro forma condensed consolidated financial
statements of SMTEK have been prepared giving effect to the sale of Irlandus
as if the transaction had taken place at September 30, 1999 for the pro
forma condensed consolidated balance sheet, and on July 1, 1998 in the case
of both the pro forma condensed consolidated statement of operations and
comprehensive income (loss) for the year ended June 30, 1999 and the pro
forma condensed consolidated statement of operations for the three months
ended September 30, 1999.
On November 12, 1999, SMTEK sold Irlandus for 2,800,000 British pounds
sterling (approximately $4,523,000), comprised of a cash dividend of 500,000
pounds sterling paid by Irlandus just prior to closing and cash of 2,300,000
pounds sterling paid by the purchaser at closing. SMTEK used a portion of
the sales proceeds to pay down its outstanding borrowings under its U.S.
bank line of credit in the amount of approximately $2,421,000.
Irlandus was the sole operating unit which comprised SMTEK's printed
circuit board business segment. Accordingly, Irlandus has been accounted
for as a discontinued operation.
Because the sale of Irlandus is assumed to occur on July 1, 1998, the
results of operations of Irlandus for fiscal 1999 are eliminated by a pro forma
adjustment in the accompanying pro forma condensed consolidated statement of
operations and comprehensive income (loss) for the year ended June 30, 1999.
At the time of sale, Irlandus had an accumulated foreign currency
translation loss of approximately $756,000. In accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation", this
amount has been included in the determination of the $662,000 loss on sale
of discontinued operations, as shown in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999. In accordance with Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", an equal and
offsetting amount to the $756,000 foreign currency translation account
balance included in the loss on sale of discontinued operations is reported
as other comprehensive income in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999.
The unaudited pro forma financial information is not necessarily
indicative of the results of operations or the financial position which
would have resulted had the sale of Irlandus actually been consummated at
any of the foregoing assumed dates, or which may result in the future. The
pro forma financial information should be read in conjunction with SMTEK's
historical financial statements.
F-1
<PAGE>
SMTEK INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
(In thousands)
Historical Pro forma Pro forma
amounts adjustments amounts
------- --------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 4,049 $ (1,525)(A) $ 4,349
1,825 (B)
Accounts receivable, net 10,682 (1,868)(A) 8,814
Costs and estimated earnings
in excess of billings on
uncompleted contracts,
net of progress billings 6,958 6,958
Inventories 6,450 (644)(A) 5,806
Prepaid expenses 325 (62)(A) 263
------ ------ ------
Total current assets 28,464 (2,274) 26,190
Property and equipment, net 9,289 (3,447)(A) 5,842
Goodwill 2,104 2,104
Deposits and other assets 324 324
------ ------ ------
$ 40,181 $ (5,721) $ 34,460
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank lines of credit payable $ 4,861 $ (2,421)(B) $ 2,440
Current portion of long-term
debt 2,157 (478)(A) 1,679
Accounts payable 11,263 (1,331)(A) 9,932
Other current liabilities 4,936 (269)(A) 4,667
------ ------ ------
Total current liabilities 23,217 (4,499) 18,718
------ ------ ------
Long-term debt 7,234 (1,316)(A) 5,918
------ ------ ------
Stockholders' equity:
Common stock and additional
paid-in capital 36,971 36,971
Accumulated deficit (26,654) (662)(C) (27,316)
Accumulated other comprehensive
income (loss) (587) 756 (C) 169
------ ------ ------
Total stockholders' equity 9,730 94 9,824
------ ------ ------
$ 40,181 $ (5,721) $ 34,460
====== ====== ======
F-2
<PAGE>
SMTEK INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
YEAR ENDED JUNE 30, 1999
(Unaudited)
(In thousands except per share amounts)
Historical Pro forma Pro forma
results adjustments results
------- --------- -------
Sales $59,492 $(8,317)(D) $51,175
------ ------ ------
Costs and expenses:
Cost of goods sold 51,523 (6,917)(D) 44,606
Administrative and selling 6,662 (1,109)(D) 5,553
Amortization of goodwill 1,284 1,284
------ ------ ------
59,469 (8,026) 51,443
------ ------ ------
Operating income (loss) 23 (291) (268)
------ ------ ------
Non-operating income (expense):
Interest expense (1,678) 14 (D) (1,458)
206 (E)
Other income (expense) 362 (241)(D) 121
------ ------ ------
(1,316) (21) (1,337)
------ ------ ------
Loss from continuing operations
before income taxes (1,293) (312) (1,605)
Provision for income taxes (1,202) (1,202)
------ ------ ------
Loss from continuing operations (2,495) (312) (2,807)
Loss from sale of discontinued
operations net of tax - (662)(C) (662)
------ ------ ------
Net loss (2,495) (974) (3,469)
------ ------ ------
Other comprehensive income (loss):
Foreign currency translation
adjustments (228) (228)
Reclassification of foreign currency
translation adjustments included in
loss from discontinued operations - 756(C) 756
------ ------ ------
Other comprehensive income (loss) (228) 756 528
------ ------ ------
Comprehensive loss $(2,723) $ (218) $(2,941)
====== ====== ======
Loss from continuing operations
per share $ (1.41) $ (1.58)
====== ======
Shares used in computing loss from
continuing operations per share 1,771 1,771
====== ======
F-3
<PAGE>
SMTEK INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
(In thousands except per share amounts)
Historical Pro forma Pro forma
results adjustments results
------- --------- -------
Sales $ 15,211 $ 15,211
------ ------
Costs and expenses:
Cost of goods sold 13,378 13,378
Administrative and selling 1,350 1,350
Amortization of goodwill 326 326
------ ------
15,054 15,054
------ ------
Operating income 157 157
------ ------ ------
Non-operating income (expense):
Interest expense (252) 52 (E) (200)
Other income (expense) 37 37
------ ------ ------
(215) 52 (163)
------ ------ ------
Loss from continuing operations
before income taxes (58) 52 (6)
Provision for income taxes (20) (20)
------ ------ ------
Loss from continuing operations $ (78) $ 52 $ (26)
====== ====== ======
Loss from continuing operations
per share $(0.03) $(0.01)
====== ======
Shares used in computing loss from
continuing operations per share 2,267 2,267
====== ======
F-4
<PAGE>
SMTEK INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(In thousands)
(A) To remove assets and liabilities of Irlandus Circuits.
(B) To record cash received on sale of Irlandus Circuits,
net of cash disbursed for transaction costs, as follows:
Sales proceeds paid by cash dividend from Irlandus $ 808
Sales proceeds paid in cash by purchaser 3,715
-------
Total sales proceeds 4,523
Cash paid for transaction costs (277)
-------
Net sales proceeds 4,246
Less cash disbursed to pay down borrowings
under U.S. bank line of credit (2,421)
-------
Net increase in cash $ 1,825
=======
(C) To record the loss on sale of Irlandus Circuits,
calculated as follows:
Net sales proceeds per (A) above $ 4,246
Assets of Irlandus Circuits $ 7,546
Liabilities of Irlandus Circuits (3,394)
-------
Net assets of divested operation 4,152 (4,152)
------- -------
Gain on sale before elimination of
currency translation account 94
Elimination of foreign currency translation account
balance of Irlandus Circuits (756)
-------
Loss on sale of Irlandus Circuits $ (662)
=======
(D) To eliminate the results of operations of Irlandus
Circuits for the year ended June 30, 1999.
Three Mos.
Year Ended Ended
6/30/99 9/30/99
------ -------
(E) To reduce interest expense to give effect to the
$2,421,000 paydown of bank lines of credit from
the proceeds of the Irlandus sale, with interest
calculated at an annual rate of 8.5% $ 206 $ 52
====== ======
F-5
Exhibit 10.1
AGREEMENT
(for the acquisition of the entire issued share
capital of Irlandus Circuits Limited)
THIS AGREEMENT made 12th November 1999
BETWEEN
(1) ("the Vendor") DDL EUROPE LIMITED having its registered office at 72
Silverwood Road, Lurgan, Co Armagh BT66 6NB
- -and-
(2) ("the Purchaser") FAST TRACK CIRCUITS LIMITED having its registered
office at No. 3 Annesborough Industrial Estate aforesaid
WHEREAS:-
The Purchaser wishes to acquire the entire issued share capital of Irlandus
Circuits Limited from the Vendor on the terms of this Agreement.
NOW IT IS HEREBY AGREED as follows:-
1. INTERPRETATION
(A) Definitions
In this Agreement where the context admits:
(1) "Business Day" means a day (other than a Saturday or Sunday) on which
Banks are open for ordinary banking business in Belfast.
(2) "the Company" means Irlandus Circuits Limited a company incorporated in
Northern Ireland under number NI 15962 and incorporated on 20th July 1982;
(3) "Completion" means completion of the sale and purchase of the Shares;
(4) "Consideration" means the sum of 2,300,000.00 pounds sterling;
(5) "Covenantors" means the Covenantors named in the Deed of Indemnity;
(6) "Cross Guarantee" means a guarantee given by the Company and SMTEK
Europe Limited jointly in favour of Ulster Bank Limited whereby the Company
and SMTEK Europe Limited have given mutual or cross guarantees to said Bank
in respect of indebtedness of each of them;
(7) "the Directors" means the persons listed in Part I of the Second
Schedule and "the Continuing Directors" means the persons named in Part II
of that Schedule;
(8) "the Disclosure Letter" means the letter of even date herewith from the
Vendor to the Purchaser a copy of which is annexed hereto initialled on
behalf of the parties for identification;
(9) "Inter-Company Indebtedness" means such sum which represents the net
amount (after taking into account all sums due by the Company to such other
parties) due to the Company by other companies within the group of companies
of which the Company is a member or within the group of companies of which
the Parent is a member;
(10) "the MIS Agreement" means an Agreement to be entered into between the
Company and SMTEK Europe Limited whereby the Company will be granted rights
to use in common with SMTEK Europe Limited certain facilities for computer
hardware and software for management information systems and business
operations; and
(11) "Parent" means SMTEK International, Inc a company incorporated in
Delaware having its principal office at 2151 Anchor Court, Thousand Oaks,
California 91320, USA which is the ultimate parent company in the group of
companies of which the Company is a member;
(12) "the Property" means the property particulars of which are set out in
the Third Schedule;
(13) "Regulatory Compliance" means the rules or regulations governing
securities and the sale or disposal of same which may have effect in
relation to the sale and purchase of the shares herein envisaged including
any regulations or rules of the NASDAQ Stock Market operating in the United
States;
(14) "the Shares" means the whole of the issued share capital of the Company
(consisting of 2,002,289 Ordinary Shares of 1.00 pounds sterling each fully
paid) and being held by the Vendor;
(15) "the Trading Agreement" means an Agreement to be entered into between
the Parent and the Company whereby the Parent will undertake to ensure that
members of the group of companies of which the Parent is the ultimate parent
company shall for a 3 year period following Completion offer to acquire from
the Company in each year printed circuit boards manufactured by the Company
to the gross value in each year of not less than 350,000.00 pounds sterling
(subject always to the Company offering to sell same on competitive market
terms and to same meeting with the Parent's reasonable requirements regarding
quality and delivery) PROVIDED ALWAYS that the Trading Agreement will be
terminable by the Parent on 5 Business Days written notice given at any time
in the event of SMTEK Europe Limited no longer being a member of the group of
companies of which the Parent is the ultimate parent company.
(B) Construction of Certain References
In this Agreement where the context so admits:
(1) words and phrases the definitions of which are contained in Part I of
the Companies (Northern Ireland) Order 1986 shall be construed as having the
meanings thereby attributed to them;
(2) references to statutory provisions shall be construed as references to
those provisions as amended or re-enacted or as their application is
modified by other provisions from time to time and shall include references
to any provisions of which they are re-enactments (whether with or without
modification); and
(3) references to Clauses and Schedules are references to Clauses hereof and
Schedules hereto, references to Sub-Clauses or Paragraphs are, unless
otherwise stated, references to Sub-Clauses of the Clause or Paragraphs of
the Schedule in which the reference appears, and references to this
Agreement include the Schedules.
(C) Headings
The headings and sub-headings are inserted for convenience only and shall
not affect the construction of this Agreement.
(D) Schedules
Each of the Schedules shall have effect as if set out herein.
2. CROSS GUARANTEE
2.1 The Vendor shall also use its best endeavours to procure the release of
the Company from the Cross Guarantee as soon as possible and it shall be a
continuing condition notwithstanding Completion that such release shall be
sought and obtained (the parties recognising it may not be feasible within
the time-scale to obtain such release prior to Completion in which event
however the Vendor shall indemnify the Company against any claim made by
said Bank under the Cross Guarantee to the extent same is solely related to
the indebtedness of SMTEK Europe Limited).
3. SALE OF SHARES
(A) Sale and Purchase
Subject to the Conditions referred to in clause 2 being satisfied or waived
by the parties (including if relevant agreement to defer satisfaction of any
such Conditions) and to the terms of this Agreement the Vendor shall sell
and the Purchaser shall purchase the Shares free from all liens, charges,
equities and encumbrances (and together with all rights at completion
attaching thereto).
(B) Consideration
The consideration for the Shares shall be the Consideration.
(C) Simultaneous Completion
Neither the Purchaser nor the Vendor shall be obliged to complete the
purchase and sale of any of the Shares unless the purchase and sale of all
the Shares is completed simultaneously.
4. COMPLETION AND CONDITIONS
(1) Subject to the provisions of Clause 2 and the provisions of this clause
completion of the sale and purchase of the Shares shall take place at 11.30
a.m. on 12th November 1999 at the offices of Messrs Elliott Duffy Garrett,
Solicitors, Royston House, 34 Upper Queen Street, Belfast BT1 6FD whereupon:
(A) the Vendor shall:
(i) deliver to the Purchaser:
(a) duly executed transfers of the Shares by the registered
holders thereof in favour of the Purchaser (or its nominee/s) together with
the relative share certificate/s;
(b) such waivers or consents as the Purchaser may require to
enable the Purchaser (or its nominee/s) to be registered as holders of the
Shares;
(ii) cause such persons as the Purchaser may nominate to be validly
appointed as additional directors of the Company and, upon such appointment,
forthwith cause the Directors (other than the Continuing Directors) to
retire from office delivering to the Purchaser letters under seal
acknowledging that each Director so retiring has no claim outstanding for
compensation or otherwise and without any payment either under the
Employment Rights (Northern Ireland) Order 1996 or otherwise in respect of
redundancy payment or unfair dismissal;
(iii) procure revocation of all authorities to the bankers of the
Company relating to bank accounts and giving authority to such persons as
the Purchaser may nominate to operate the same; and
(iv) deliver to the Purchaser as agent for the Company:
(a) all the statutory and other books (duly written up to date)
of the Company and its certificate of registration, securities and common
seal;
(b) the duly executed Trading Agreement;
(c) the duly executed MIS Agreement;
(B) the Purchaser shall pay the Consideration in cash by internal Ulster
Bank Markets Limited transfer to the account of the Parent at Ulster Bank
Markets Donegall Square East Belfast and such transfer shall be an effective
discharge to the Purchaser:-
(2) If in any respect the provisions of item (A) of Sub-Clause (1) of this
Clause are not complied with on the date for Completion set by that Sub-
Clause the Purchaser may:
(A) defer Completion to a date not more than 20 Business Days after the
date set by Sub-Clause (1) of this Clause (and so that the provisions of
this Sub-Clause (2) shall apply to Completion as so deferred); or
(B) proceed to Completion so far as practicable (without prejudice to
its rights hereunder); or
(C) rescind this Agreement.
5. WARRANTIES
(A) Fourth Schedule
The Fourth Schedule shall have effect.
(B) Purchaser's Knowledge
The warranties and representations contained in the Fourth Schedule are
given firstly subject to matters fairly disclosed in this Agreement or the
Disclosure Letter and secondly subject to the limitations on the Vendor's
liability contained in the Fifth Schedule but no other information relating
to the Company of which the Purchaser has constructive knowledge shall
prejudice any claim made by the Purchaser under such warranties and
representations or operate to reduce any amount recoverable. PROVIDED
ALWAYS that no claim shall be made by the Purchaser under such warranties
and representations where the Purchaser or any Continuing Director has
actual knowledge of the matter which may be in breach of the warranties and
representations or the relevant warranty and/or representation.
(C) Warranties to be independent
The warranties and representations set out in each Sub-Paragraph of
Paragraph 2 of the Fourth Schedule shall be separate and independent, save
where expressly provided otherwise.
(D) Damages
Without restricting the rights of the Purchaser or the ability of the
Purchaser to claim damages on any basis available to it in the event that
any of the said warranties or representations is broken or proves to be
untrue or misleading, the Vendor hereby covenants with the Purchaser for
itself and as trustee for the Company that the Vendor will, on demand, pay
to the Purchaser an amount equal to any deficiency or liability of the
Company which arises from any breach of any of the said warranties and
representations or which would not have existed or arisen if the said
warranties and representations had been true.
6. PROVISIONS RELATING TO THIS AGREEMENT
(A) Assignment
This Agreement is personal to the parties to it. Accordingly, neither the
Purchaser nor the Vendor may, without the prior written consent of the
other, assign the benefit of all or any of the other's obligations under
this Agreement, nor any benefit arising under or out of this Agreement.
(B) Whole Agreement
This Agreement (together with any documents referred to herein) constitutes
the whole agreement between the parties hereto relating to its subject
matter and no variations hereof shall be effective unless made in writing.
The Purchaser acknowledges that it has not been induced to enter into this
Agreement by any representation, warranty, promise or assurance by the
Vendor or any other person save for those contained in this Agreement and in
the Disclosure Letter. The Purchaser agrees that (except in the case of
fraud) it shall have no right or remedy in respect of any other
representation, warranty, promise or assurance save for those contained in
this Agreement. The Purchaser acknowledges that its legal advisers have
explained to it the effect of this Sub-Clause (B).
(C) Agreement Survives Completion
The provisions of this Agreement in so far as the same shall not have been
performed at completion shall remain in full force and effect
notwithstanding completion.
(D) Rights of Rescission
Any right of rescission conferred upon the Purchaser hereby shall be in
addition to and without prejudice to all other rights and remedies available
to it and no exercise or failure to exercise such a right of rescission
shall constitute a waiver by the Purchaser of any such other right or
remedy.
(E) Law
This Agreement shall be governed by and construed in accordance with the law
of Northern Ireland and the parties hereby submit to the non-exclusive
jurisdiction of the Northern Ireland Courts.
(F) Notices
Any notice required to be given by either party hereto to the other shall be
deemed validly served if served personally at the address of the relevant
party given herein or on the solicitors for such party or if given by
prepaid recorded delivery letter sent through the post to the address given
herein of the relevant party or such other address as may from time to time
be notified for this purpose, and any notice so served by post shall be
deemed to have been served 24 hours after the time at which it was posted
and in proving such service it shall be sufficient to prove that the notice
was properly addressed and posted. In addition to the foregoing service may
be effected by fax sent to the relevant party or the solicitor for such
party and notice given by fax shall be deemed validly given PROVIDED the
recipient's answer back code is duly received by the sender at the start and
end of the message provided further that any notice despatched by fax after
17.00 hours (at the place where such fax is to be received) on any day shall
be deemed to have been received at 8.00am on the next Business Day.
7. COSTS
Each party to this Agreement shall pay its own costs of and incidental to
this Agreement and the sale and purchase hereby agreed to be made.
FIRST SCHEDULE
THE SHARES AND THE REGISTERED HOLDERS
(1) (2)
Name of Holder Number of Shares
The Vendor 2,002,289
SECOND SCHEDULE
PART I
DIRECTORS
Robert Gribben Adair
Gregory L Horton
Sean Francis Ritchie
George Raymond Weatherford
PART II
THE CONTINUING DIRECTORS
Robert Gribben Adair
Sean Francis Ritchie
THIRD SCHEDULE
THE PROPERTY
Description
Owner of Property Tenure
The Company The premises containing 5.018 999 years from
Long Leasehold hectares on the August 1989
North West side of Annesborough
Road, Craigavon the title to
which is registered in Folio AR8309L
County Armagh in the Land Registry
of Northern Ireland
FOURTH SCHEDULE
WARRANTIES AND REPRESENTATIONS
1. INTERPRETATION
In this Schedule where the context so admits:
(1) "the Audited Accounts" means the audited balance sheet of the Company
made up as at the Balance Sheet Date and the audited profit and loss account
of the Company for the financial period of 12 months ended on that date,
true copies of which are annexed to the Disclosure Letter initialled on
behalf of the parties and including the notes thereto;
(2) "the Balance Sheet Date" means 2nd July 1999;
(3) "Encumbrance" includes any interest or equity of any person (including
without prejudice to the generality of the foregoing, any right to acquire,
option or right of preemption) or any mortgage, charge, pledge, lien,
assignment, hypothecation, security interest, title retention or any other
security agreement or arrangement;
(4) "Intellectual Property" means patents, trade marks, registered designs,
applications for any of the foregoing, trade or business names and
copyright;
(5) "Intellectual Property Agreements" means agreements or arrangements
relating (wholly or partly) to Intellectual Property or to the disclosure,
use, assignment or patenting of any inventions, discovery, improvements,
processes, formulae or other know-how;
(6) "SSAP" means Statement of Standard Accounting Practice in force at the
date hereof as issued by the Institute of Chartered Accountants;
(7) any question whether a person is connected with another shall be
determined in accordance with s.839 Income and Corporation Taxes Act 1988
(subject to the deletion of the words from "Except" to "arrangements in sub-
section (4) thereof" which shall apply in relation to this Schedule as it
applies in relation to that Act;
(8) where any statement in these warranties and representations is
qualified by the expression "so far as the Vendor is aware" or any similar
expression such reference or qualification shall be taken to mean the
knowledge, information or belief which the Vendor has or ought reasonably to
have after making such due and careful enquiries of the Continuing Directors
as is reasonable and prudent in the circumstances.
2. WARRANTIES AND REPRESENTATIONS
The Vendor hereby warrants and represents to and for the benefit of the
Purchaser in the following terms:
THE COMPANY AND THE Vendor
(1) Capacity
The Vendor has full power to enter into and perform this Agreement and this
Agreement constitutes binding obligations on the Vendor in accordance with
its terms.
(2) Loans
Upon payment of the Inter-Company Indebtedness (if any) there will not
(save in respect of Trading Accounts) be:
(i) any further indebtedness or other liability (actual or contingent)
owing by the Company to the Vendor (or any member of the group of companies
of which the Vendor is a member or of which the Parent is a member) or any
Director or any person connected with the Vendor (or any such member of the
group of companies of which the Vendor is a member or the Parent is a
member) nor
(ii) any outstanding indebtedness owing to the Company by any such
party.
THE COMPANY'S CONSTITUTION
(4) Share Capital
The Company has an authorised share capital of 2,002,289.00 pounds sterling
divided into 2,002,289 ordinary shares of 1.00 pounds sterling all of which
are in issue fully paid and beneficially owned by the Vendor and held and
registered in its name.
(5) Memorandum and Articles
The copy of the Memorandum and Articles of Association of the Company
annexed to the Disclosure Letter is true and complete and has embodied
therein or annexed thereto a copy of every such resolution or agreement as
required by the Companies (Northern Ireland) Orders.
(6) Company Resolutions
Neither the Company nor any class of its members has passed any resolution
(other than resolutions relating to business at Annual General Meetings
which was not special business).
(7) Options etc.
No person has the right (whether exercisable now or in the future and
whether contingent or not) to call for allotment, issue, sale or transfer of
any share or loan capital of the Company under any option or other agreement
(including conversion rights and rights of pre-emption).
THE COMPANY
(8) Litigation
So far as the Vendor is aware the Company is not engaged in any litigation
or arbitration proceedings and so far as the Vendor are aware no litigation
or arbitration proceedings are pending or threatened by or against the
Company and there are no facts likely to give rise to any litigation and the
Company has not been a party to any undertaking or assurance given to any
Court or governmental agency which is still in force.
(9) Insolvency
So far as the Vendor is aware no order has been made or petition presented
or resolution passed for the winding up of the Company, nor has any
distress, execution or other process been levied against the Company or any
of its assets.
THE COMPANY'S ACCOUNTS AND RECORDS
(10) Provision for liabilities
The Vendor has not pledged by any means the assets of the Company or any of
them as security for the indebtedness of any party.
THE COMPANY'S BUSINESS
(11) Business since the Balance Sheet Date
So far as the Vendor is aware since the Balance Sheet Date:
(a) the Company has not borrowed or raised any money or taken any
financial facility;
(b) the Company has not entered into, or agreed to enter into, any
capital commitments;
(c) no shares or loan capital have been issued or agreed to be issued by
the Company; and
(d) no distribution of capital or income has been declared made or paid
in respect of any share capital of the Company and (excluding fluctuations
in overdrawn current accounts with bankers) no loan or loan capital or
preference capital of the Company has been repaid in whole or part or has
become liable to be repaid.
(12) Consequence of share acquisition by the Purchaser
So far as the Vendor is aware the acquisition of the Shares by the Purchaser
or the compliance with the terms of this Agreement:
(a) will not cause the Company to lose the benefit of any right or
privilege it presently enjoys or cause any person who normally does business
with the Company not to continue to do so on the same basis as previously;
(b) will not relieve any person of any obligation to the Company
(whether contractual or otherwise) or enable any person to determine any
such obligation or any right or benefit enjoyed by the Company or to
exercise any right whether under an agreement with or otherwise in respect
of the Company; and
(c) will not give rise to or cause to become exercise able any right of
pre-emption;
and to the best of the knowledge and belief of the Vendor the Company's
relationships with clients, customers and suppliers will not be adversely
affected thereby.
THE COMPANY'S ASSETS
(13) Assets and Charges
(a) So far as the Vendor is aware except for current assets disposed of
by the Company in the ordinary course of its business the Company is the
owner of and has good marketable title to all assets included in the Audited
Accounts and all assets which have been acquired by the Company since the
Balance Sheet Date and no such asset, nor any of the undertaking, goodwill
or uncalled capital of the Company is subject to any Encumbrance or any
agreement or commitment to give or create any Encumbrance.
(b) So far as the Vendor is aware since the Balance Sheet Date, save for
disposals in the ordinary course of its business, the assets of the Company
have been and remain in the possession of, or under the control of the
Company.
(14) Intellectual Property Rights
(a) So far as the Vendor is aware the Company is the sole beneficial
owner of the Intellectual Property referred to in the Disclosure Letter and
(where such property is capable of registration) the registered proprietor
thereof and (save for copyrights) owns no other Intellectual Property and no
person has been authorised to make any use whatsoever of any Intellectual
Property owned by the Company and the Company has not disclosed (except in
the ordinary course of its business) any of its know-how, trade secrets or
list of customers to any other person.
(b) So far as the Vendor is aware the Company owns the copyright in the
designs of all its products and so far as the Vendor is aware none of the
processes or products of the Company infringes any right of any other person
relating to Intellectual Property or involves the unlicensed use of
confidential information disclosed to the Company by any person in
circumstances which might entitle that person to a claim against the Company
and none of the Intellectual Property is being used, claimed, opposed or
attacked by any person.
(15) Title to the Property
So far as the Vendor is aware the particulars of the Property shown in the
Fourth Schedule are true and correct and the owner shown therein has good
and marketable title to and exclusive occupation of each Property which it
is said to own free from any Encumbrance (save a charge in favour of the
Department of Economic Development).
(16) Matters affecting the Property
So far as the Vendor is aware no written notice, written order, written
proposal for acquisition, clearance, demolition or closing, the carrying out
of any work upon any building, the modification of any planning permission,
the discontinuance of any use or the imposition of any building or
improvement line has been made or issued by or on behalf of any governor,
statutory authority, department or body to the Vendor;
(17) Material Contracts
So far as the Vendor is aware the Vendor has not without the knowledge of
the Continuing Directors caused the Company to be bound by an agreement or
arrangements whereby:
(a) the Company will be likely to suffer a loss on completion or
performance of the relevant contract or arrangement; or
(b) the Company is involved or likely to be involved in obligations,
restrictions, expenditure or receipts of an unusual, onerous or exceptional
nature and not in the ordinary course of the Company's business; or
(c) the Company will be required to expend an aggregate consideration in
excess of 25,000.00 pounds sterling; or
(d) the Company's freedom would be restricted in carrying on the whole
or any part of its business in any part of the world in such manner as it
thinks fit;
(18) Sureties
So far as the Vendor is aware no person other than the Company has given any
guarantee of or security for any overdraft loan or loan facility granted to
the Company.
(19) Powers of Attorney
So far as the Vendor is aware there are in force no powers of attorney given
by the Company (other than to the holder of an Encumbrance solely to
facilitate its enforcement) and no person, as agent or otherwise, is
entitled or authorised to bind or commit the Company to any obligation not
in the ordinary course of the Company's business.
(20) Options and Guarantees
So far as the Vendor is aware the Company is not a party to any option or
pre-emption right, or a party to any guarantee or suretyship or any other
obligation (whatever called) to pay, purchase or provide funds (whether by
the advance of money, the purchase of or subscription for shares or other
securities, the purchase of assets or services, or otherwise) for the
payment of, indemnity against the consequence or default in the payment of,
or otherwise to be responsible for, any indebtedness of any other person.
THE COMPANY AND ITS BANKERS
(21) Continuation of Facilities
The Vendor has supplied to the Purchaser in writing full details of all
overdrafts, loans or other financial facilities outstanding or available to
the Company known to the Vendor and true and correct copies of all documents
relating thereto and the Vendor has not done anything whereby the
continuance of any such facilities in full force and effect might be
affected or prejudiced.
(22) Bank Accounts
A statement of all the bank accounts of the Company and of the credit or
debit balances on such accounts as at a date not more than seven days before
the date hereof has been supplied to the Purchaser. To the best of the
Vendor's knowledge the Company has not any other bank or deposit accounts
(whether in credit or overdrawn) not included in such statement. To the
best of the Vendor's knowledge since such statement there have been no
payments out of any such accounts except for routine payments and to the
best of the Vendor's knowledge the balances on current account are not
substantially different from the balances shown on such statements.
THE COMPANY AND ITS EMPLOYEES ETC
(23) Directors
To the best of the Vendor's knowledge the particulars shown in the Second
Schedule are true and complete and to the best of the Vendor's knowledge no
person other than those named therein is a director of the Company.
(24) Service Contracts
So far as the Vendor is aware there is not outstanding any Contract of
Service between the Company and any of its directors, officers or employees
which is not terminable by the Company without compensation (other than any
compensation payable by statute) on three month's notice given at any time.
(25) Pensions
To the best of the Vendor's knowledge the Company has no obligation (whether
legally binding or established by custom) to pay any pension or make any
other payment after retirement or death or otherwise to provide relevant
benefits to or in respect of any person who is now or has been an officer or
employee of the Company and is not a party to any scheme or arrangement
having as its purpose or one of its purposes the making of payments or the
provision of benefits as aforesaid.
(26) Employees
To the best of the Vendor's knowledge the List of Employees annexed to the
Disclosure Letter is true and complete and the Vendor is not aware of any
other employee of the Company or other individual who has been appointed to
perform services for the Company as an employee or agent for remuneration.
(27) GENERAL WARRANTY RE TAXATION AND VENDOR AND PARENT'S ACTION
The Company has no liability to taxation (whether on income, trading,
gains, royalties, Value Added Tax, imposts of any kind etc) of any kind in
any part of the world in consequence or by reason of any act or event on the
part of or caused by the Vendor or any member of the group of companies of
which the Vendor is a member (excluding the Company) or the Parent which has
not been disclosed or is otherwise known to the Purchaser.
GRANTS
(28) So far as the Vendor is aware no grant or assistance received by the
Company from the Industrial Development Board for Northern Ireland is
repayable (in whole or in part) by reason of the completion of the sale and
purchase herein envisaged.
(29) Particulars of Subsidiaries
As far as the Vendor is aware the Company has no subsidiary company.
(30) Declarations of Dividends which remain unpaid
No dividends have been declared by the Company since incorporation of the
Company which have not been paid in full and declared and paid in accordance
with the Articles of Association of the Company and the Companies Acts or
other relevant legislation.
(31) Trading Accounts
The amounts shown on the Sales Invoices and Statements issued to,
respectively, the Parent and SMTEK Europe Limited and contained in,
respectively, paragraphs 15 and 16 of Schedule A to the Disclosure Letter
are materally correct.
MATERIAL DISCLOSURE
(31) All information contained or referred to in the Disclosure Letter is
accurate in all material respects.
FIFTH SCHEDULE
LIMITATION ON VENDOR'S LIABILITY
1. In this Schedule "Relevant Claim" means a claim made against the Vendor
in respect of any of the warranties.
2. No Relevant Claim shall be made unless written notice containing
specific details of the Relevant Claim is served on the Vendor before the
date 18 calendar months following the date of this Agreement.
3. A Relevant Claim shall not be enforceable against the Vendor and shall
be deemed to have been withdrawn unless any legal proceedings in connection
with it are commenced within 6 months after written notice of it is first
served on the Vendor.
4. The aggregate amount of the liability of the Vendor in respect of all
Relevant Claims and in respect of any claim for breach of any other
provision of this Agreement shall not exceed 400,000.00 pounds sterling.
5. No liability shall attach to the Vendor in respect of Relevant Claims
unless the aggregate amount of the liability of the Vendor in respect of all
such Relevant Claims shall exceed 35,000.00 pounds sterling in which event,
subject always to the provisions of this Paragraph 5, the Vendor shall be
liable for the whole amount and not just the excess provided always that no
Relevant Claim shall be made unless the individual claim exceeds 3,500.00
pounds sterling (in which event, subject always to the provisions of this
Paragraph 5, the Vendor shall be liable for the full amount of the individual
claim) and any such individual claim which does not exceed 3,500.00 pounds
sterling shall be disregarded for all purposes.
6. The Vendor shall not be liable in respect of a Relevant Claim:
6.1 if it would not have arisen but for anything voluntarily done or
omitted to be done after Completion by the Company or any of their
respective agents, assignees of other successors in title;
6.2 to the extent that it arises or is increased as a result only of:
6.2.1 an increase in the rates, method of calculation or scope of taxation
or change in the law or practice or policy of any taxation collecting or
levying authority after the Balance Sheet Date;
6.2.2 the passing of any legislation, or making of any subordinate
legislation, with retrospective effect;
6.2.3 any change in generally accepted accounting practice after the
Balance Sheet Date;
6.3 to the extent that it relates to any loss (1) for which the Company is
indemnified by insurance (save in respect of any excess amount or excess
amounts) at the date of this Agreement and in respect of which and to the
extent that the insurance company actually makes payment to the Company in
respect of such claim (save where and to the extent that the insurance
company does not make the payment as a result of the act or default of the
Company after Completion) or (2) which has been made good or is otherwise
compensated for without cost to the Purchaser or the Company;
6.4 to the extent that it relates to 6.4.1 any matter provided or reserved
for, or included as a liability or disclosed, in the 1999 Accounts;
6.5 if it is a claim which is due to any change after Completion in the
accounting principles, bases, policies and methods adopted by the Company
from those used in the preparation of the 1999 Accounts;
6.6 would not have arisen but for a voluntary act or transaction, which:
6.6.1 is carried out at the request of or with the approval, concurrence or
assistance of the Purchaser; or
6.6.2 is provided for in or carried out to comply with the terms of or give
effect to this Agreement.
7. In calculating the liability of the Vendor in respect of any Relevant
Claim credit shall be given to the Vendor to the extent of any amount by
which any provision or reserve in the 1999 Accounts proves to be unnecessary
and/or excessive (whether or not relating to the subject matter of the
claim).
8. Where the Purchaser or the Company is entitled to recover from or be
indemnified by some other person in respect of any sum arising out of any
matter or event which could give rise to a Relevant Claim, the Purchaser
shall or shall procure that the Company shall (as the case may be) (1)
notify the Vendor as soon as reasonably possible of the possible entitlement
specifying in reasonably sufficient detail the possible entitlement and (2)
subject to it and the Company being firstly fully indemnified by the Vendor
in respect of all proper and reasonable costs and expenses, to take all
appropriate steps to recover that sum and any sum recovered including any
amount the claimant would be entitled to recover but for some right of set-
off or counterclaim of the other person which does not of itself constitute
a Relevant Claim, will reduce the amount of the Relevant Claim to the extent
of the recovery and in the event of the amount so recovered exceeding the
amount of the Relevant Claim, such excess over the amount of the Relevant
Claim shall be paid to the Vendor within 14 days of receipt by the Company
or the Purchaser of the amount so recovered.
9. VOID
10. the Purchaser shall procure that the Company shall accept and comply
with Paragraphs 7 and 8 as if each person were a party to and bound by this
Agreement.
11. Where any payment is made to the Company or to the Purchaser under
Paragraph 8 above, any liability of the Vendor to which it relates will, for
the purpose of calculating the aggregate liability mentioned in Paragraph 4
above, be deemed to have been reduced by the amount of the payment.
12. The Purchaser:
12.1 confirms that in entering into this Agreement it relies on no other
warranties, representations, covenants, undertakings, indemnities or other
information than those expressly set out in the warranties and the
Disclosure Letter and such information in writing received from the Vendor's
advisers as is expressly set out in the Disclosure Letter; and
12.2 agrees that no other information, advice or assurances it or any one
on its behalf may have received from the Vendor or its advisors or anyone
else on its behalf in relation to the Company or otherwise in relation to
this Agreement or its negotiation may be legally relied upon in any manner;
12.3 waives any rights it may have in respect of any information, advice or
assurances it may have received other than those expressly set out in the
warranties and the Disclosure Letter.
13. The Vendor shall not be liable to make any payment in respect of any
Relevant Claim based upon a contingent liability of the Company until the
liability becomes an actual liability and is paid and the Vendor is given
firstly at least 20 Business Days written notice of the Purchaser's
intention or the Company's intention to make the payment and secondly the
opportunity to make written representations to the Purchaser as to the
question of whether the payment should be made.
14. Any benefit accruing to the Purchaser or the Company as a result of the
existence of the circumstances giving rise to the Relevant Claim shall be
quantified and its value deducted from the amount of the Relevant Claim.
15. VOID
16. If after the Vendor has paid any sum in respect of a Relevant Claim the
Purchaser or the Company becomes entitled or has a claim to recover any sum
from any person in respect of the subject matter of that claim the
provisions of Paragraph 8 above shall apply mutatis mutandis to that right
or claim to recovery and the Purchaser shall pay (or permit the Vendor to
retain) a sum equal to the lesser of:
16.1 any amount the Purchaser or the Company is entitled to recover (net of
all costs and expenses reasonably and properly incurred by it in pursuing
the claim against the other person); and
16.2 the amount paid by the Vendor in respect of the Relevant Claim; to the
Vendor forthwith upon the amount of the liability of the other person (if
any) being paid.
17. Insofar as the payments made by the Vendor to the Purchaser in respect
of Relevant Claims are less than the aggregate purchase consideration
pursuant to the terms of this Agreement they shall constitute a repayment of
any a reduction in such purchase consideration.
18. VOID
19.1 If any matters or circumstances which may give rise to a Relevant
Claim comes to the attention of the Purchaser of the Company it shall:
19.1.1 as soon as practicable give written notice to the Vendor setting out
the particulars known to it, specifying in reasonably sufficient detail the
nature of the claim and so far as practicable the amount claimed in respect
of the Relevant Claim;
19.1.2 ensure that no admission or liability or agreement or compromise in
relation to the matter or circumstance is made without the written consent
of the Vendor (not to be unreasonably withheld or delayed);
19.1.3 give the professional advisers of the Vendor such reasonable access
to the premises and personnel of the Purchaser or the Company as they may
request and allow them the opportunity as they reasonably request to examine
any relevant chattels, accounts, documents and records in the possession or
control of either.
19.2 The Vendor and its professional advisers shall keep confidential any
information obtained or received by them under the provisions of this
Paragraph 19 except so far as information is required in exercising their
rights under this paragraph.
19.3 Prior to making any Relevant Claim against the Vendor the Purchaser
shall permit the Vendor (whether before or after payment of any claim) in
the name of the Company to avoid dispute, resist, appeal, compromise or
defend any matter which may otherwise result in a claim and give the Vendor
all authorities and assistance as may be reasonably requested by the Vendor
to enable them to do so (subject to providing the Company concerned with an
effective indemnity in respect of the proper and reasonable costs and
liabilities incurred).
19.4 The Purchaser shall procure that the Company shall observe and perform
the provision of this Paragraph 19.
19.5 The Purchaser shall be entitled and (at the request and proper and
reasonable cost of the Vendor) obliged (on the same basis as the relevant
claimant) to give any consent or approval required and make any agreement
required with respect of anything provided for in this Paragraph 19.
19.6 The Purchaser guarantees to the Vendor the due observance and
performance by the company of the terms of this Paragraph 19.
19.7 These warranties shall remain in full force and effect after
Completion but the Purchaser shall have no right to rescind or terminate
this Agreement after Completion and the Purchaser's sole remedy in respect
of a claim under the warranties shall be against the Vendor in damages
subject to the limitations contained in this Agreement.
SIGNED on behalf of the
VENDOR
/s/ GREGORY L. HORTON
- ----------------------
Authorised Director
SIGNED on behalf of the
PURCHASER
/s/ SEAN F. RITCHIE
- ----------------------
Authorised Director
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
______________________
From: SMTEK International, Inc. Contact: Rick Vitelle
2151 Anchor Court Chief Financial Officer
Thousand Oaks, CA 91320 (805) 376-2595
SMTEK International Announces Sale of Irlandus Circuits Ltd.
______________________________________________________________
THOUSAND OAKS, CALIFORNIA (November 19, 1999) - SMTEK International,
Inc. (Nasdaq: SMTI) today announced that it has sold its Northern Ireland
printed circuit board (PCB) operation, Irlandus Circuits Ltd., to a local
management buy-out group for 2.8 million pounds sterling, or approximately
$4.5 million (U.S.) cash. The gain on the sale was not material.
The Company stated that the sale represented the divestiture of the
last PCB operation from the former DDL Electronics and will enable the
company to focus on its core competencies in electronics manufacturing
services (EMS).
Headquartered in Thousand Oaks, California, SMTEK International, Inc.
is an EMS provider serving original equipment manufacturers (OEMs) in the
computer, telecommunications, instrumentation, medical, industrial and
aerospace industries. The company provides integrated solutions to OEMs
across the entire product life cycle, from design to manufacturing to end-
of-life services, for the worldwide low to medium volume, high complexity
segment of the EMS industry. The company's EMS operations are located in
Southern California, Florida and Northern Ireland.
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